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Retailers gain in Jan. as shoppers shook off the snow
Question of the Day
NEW YORK (AP) — Retailers reported surprisingly solid January revenue gains Thursday that swept away fears that snowstorms in much of the country had chilled sales.
The reports, which are being compared with a respectable January 2010, offer encouraging signs that consumer spending is maintaining the momentum of the strong holiday season.
Many retail chains, including Costco Wholesale Corp., Victoria's Secret parent Limited Brands and Macy's Inc., posted gains that beat Wall Street expectations.
Luxury merchants Nordstrom Inc. and Saks Inc. also were bright spots as the affluent, encouraged by the rallying stock market, continue to lead the spending recovery.
The International Council of Shopping Centers index of 32 stores showed a robust 4.8 percent increase for January, well above the 1.5 percent to 2 percent range projected earlier in the week. January's pace was above the 3.1 percent gain in November and capped retailers' fiscal year, which averaged a 3.5 percent increase.
The figures are based on revenue at stores opened at least a year for Jan. 2 through last Saturday. It is considered a key indicator of a retailer's health because it excludes the effects of stores that open or close during the year.
"Retailers weathered the storm both literally and figuratively," said Michael P. Niemira, chief economist at the International Council of Shopping Centers. "It is a signal that underlying consumer demand is pretty solid."
Among the notable stragglers was Target Corp., whose business was below expectations, particularly in the South and Northeast.
J.C. Penney Co. reported an unexpected revenue decline; officials blamed lower levels of winter clearance compared with last January, as well as bad weather.
January is the least important month of the year for retailers because they use the month to clear out winter goods to make room for spring merchandise. Still, the strength brightened fiscal fourth-quarter profit outlooks from Limited Brands, J.C. Penney and teen retailer Wet Seal Inc.
In recent weeks, analysts reduced their estimates as a series of snowstorms in several parts of the country kept shoppers at home and left them with little appetite for spring clothing.
Some retailers noted in their reports that snow did curb some spending. Underlying consumer strength remained strong, adding hopes for a sustainable economic recovery.
Shoppers got out more than expected, replenishing their wardrobes with boots, coats and other winter items to weather the storm as they took advantage of deals, said Ken Perkins, president of RetailMetrics LLC.
Another factor in boosting January's sales index was the stellar performance of both Costco and Limited Brands, which combined contributed about 1.7 percentage points to the index, Mr. Niemira estimated.
Consumer spending was the main reason the economy grew at an annual rate of 3.2 percent in the final three months of 2010, the Commerce Department said Friday. It was up from 2.6 percent the previous quarter and the best since the start of last year.
Costco had a 10 percent gain in revenue at stores opened at least a year; analysts surveyed by Thomson Reuters expected an increase of 7 percent.
Target Corp. had a 1.7 percent increase in revenue at stores opened at least a year, slightly below the 1.9 percent gain that Wall Street projected. The low increase marked the second consecutive month of disappointing results.
CEO and Chairman Gregg Steinhafel said business was particularly weak in the South and Northeast, regions hit hard by snowstorms. He said Target still is counting on expanded food sections and its 5 percent discount for those who pay with its credit or debit card to drive increases this year.
Among department stores, Macy's, powered by its focus on exclusive merchandise and by its moves to tailor merchandise to local markets, posted a 2.6 percent gain. That was better than the 2.1 percent estimate from Wall Street.
"While sales in January were restrained by the series of snowstorms that caused widespread store closing along the East Coast and in the Southeast U.S., we continued to benefit from the underlying strength of our business," Terry J. Lundgren, chairman, president and CEO, said in a statement.
J.C. Penney had a disappointing 1.2 percent decline. The company said top-performing regions were the Southwest and Northwest. The snow-laden Northeast and Southeast were weaker.
Nordstrom enjoyed a 4.8 percent gain, while Saks Inc. had a 4.4 percent increase.
Limited reported a stellar 24 percent gain in revenue at stores opened at least a year and boosted its profit outlook for the fourth quarter. Business was helped by a twice-a-year sale at Victoria's Secret that moved to January from December, but the results continued a long streak of big gains.
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